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More About This Title Buyouts + Website: Success for Owners, Management, PEGs, Families, ESOPs, and Mergers andAcquisitions
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A must have book for business owners, key employees, and their advisors who need to be aware of the full spectrum of succession options, Buyouts provides objectives, advice, steps, and a host of examples on the full spectrum of insider-led buyouts. A road map for CPAs, it presents the parameters for many of the major industry segments, techniques for managing risk, providing retention and performance incentives for key personnel and insights into getting deals financed.
- Features advice and examples of insider led buyouts
- Essential guidance on succession options for business owners, key employees, and their advisors
- The 411 on selling your company for a fair price, maintaining control over the process, and realizing lifelong goals
Transition planning is becoming a hot business topic as millions of business owners head into retirement. The fact is that only a limited number of privately held companies will be successfully sold to third parties. A road map for CPAs, Buyouts presents the parameters for many of the major industry segments, techniques for managing risk, providing retention and performance incentives for key personnel, as well as insights into getting deals financed.
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SCOTT MILLER, CPA, ABV, CVA, PFS, CMAP, is President of Enterprise Services, Inc. (ESI), a nationally recognized firm in ESOP consulting and valuations, with over 500 clients. An entrepreneur with an extensive history of senior-level industry experience and significant equity ownership in his employers, Miller has authored four professional publications for AICPA on mergers and acquisitions, buying and selling business, ESOPs, and valuing ESOPs. Since founding ESI, Miller has worked with hundreds of businesses throughout the country on strategic transition planning and closing transactions.
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Acknowledgments xvii
Introduction The New Reality for Business Owners in 2012 1
The Middle Market 2
Not Another Mergers and Acquisitions Book 3
Chapter Organization 4
Chapter 1 Buyout Examples 7
Case Study—SRC Holdings, Corporation 7
Case Study—SSG Financial Services 11
Case Study—Quality Assembly and Logistics, LLC 14
Case Study—Jumbo Heater & Manufacturing Lessons Learned 18
Summary 19
Chapter 2 The Economy 21
Brief Overview of the Current Recession 21
Near Term Regulatory Environment—Tax Increases 25
The Longer View 26
Summary 27
Chapter 3 Finance 29
Community Banks 30
Regional and National Money Center Banks 32
Mezzanine Funds 33
Private Equity 34
Small Business Administration and Government Sources 35
Seller Notes 36
Summary 37
Chapter 4 Valuations 39
Purpose of the Valuation 40
Determining the Transaction Consideration 41
Standard of Value for Transactions 42
Types of Buyers and Sellers 46
Attributes of Ownership—Control and Minority Positions 47
Lack of Marketability 49
Additional Adjustments to Valuation 50
Three Valuation Approaches: Income, Market, Asset 50
Summary 61
Chapter 5 Industries and Businesses 63
Technology and Software 64
Communications 65
Energy 65
Commodity Goods—Retail Food and Agriculture 65
Healthcare 65
Manufacturing 66
Construction 66
Main Street Businesses 66
Discretionary Products and Services Industries 67
Professional Services 67
Summary 67
Chapter 6 Professional Advisors 69
Attorneys 69
Certified Public Accountant 70
Financial Advisors 71
Investment Bankers 72
Behavioral Science 73
Key Employees 75
Board Members or Advisory Members 76
Family 76
Summary 77
Chapter 7 Documents and Due Diligence 79
Due Diligence for the Seller 79
Due Diligence for the Buyer 83
Common Documents and Key Covenants 86
Summary 90
Chapter 8 Short Course on Taxes 91
Tax Issues for the Seller 91
Tax Issues for the Buyer 98
Summary 101
Chapter 9 Buyouts—Non-Sponsored Management 103
Advantages 104
Cautions 105
Valuation Insights 107
Viewpoint of the Seller 109
Viewpoint of the Buyer 111
Professional Advisors 112
Risk Environment 114
Technical Matters 115
Summary 125
Chapter 10 Buyouts—Sponsored Management 127
Advantages 128
Valuation 131
Viewpoint of the Seller 132
Viewpoint of the Buyer 133
Professional Advisors 137
Risk Environment 138
Technical Matters 142
Summary 144
Chapter 11 Buyouts—Sponsored 145
Advantages 146
Cautions 147
Valuation 148
Viewpoint of the Seller 150
Viewpoint of the Buyer 151
Professional Advisors 153
Risk Environment 153
Technical Matters 156
Summary 157
Chapter 12 Buyouts—Management and Employee Stock Ownership Plans and Trust 159
Advantages 160
Cautions 163
Valuation Insights 165
Viewpoint of the Seller 166
Viewpoint of the Buyer 168
Professional Advisors 169
Risk Environment 171
Technical Matters 180
Summary 190
Chapter 13 Buyouts—100% Employee Stock Ownership Plan and Trust 191
Advantages 192
Cautions 195
Valuation Insights 197
Viewpoint of the Seller 198
Viewpoint of the Buyer 199
Professional Advisors 201
Risk Environment 202
Technical Matters 210
Summary 214
Chapter 14 Buyouts—Professional Firms 215
Architectural and Engineering, Public Accounting, and Management Consulting Firms 215
Architectural and Engineering Firms 218
Public Accounting Firms 224
Management Consulting Firms 230
Summary 233
Chapter 15 Buyouts Using Parallel Companies 235
Advantages 236
Cautions 237
Valuation Insights 238
Viewpoint of the Seller 239
Viewpoint of the Buyer 239
Professional Advisors 240
Risk Environment 241
Technical Matters 244
Summary 244
Chapter 16 Buyouts with Family and Management 245
2010 Tax Law Update 245
Advantages 246
Cautions 248
Valuation Insights 249
Viewpoint of the Seller (Founding Generation) 250
Viewpoint of the Buyer (Next Generation) 251
Professional Advisors 253
Risk Environment 254
Technical Matters 256
Summary 265
Chapter 17 Buyouts with Employee Cooperatives 267
Advantages 268
Cautions 270
Valuations 271
Viewpoint of the Seller 271
Viewpoint of the Buyer 272
Professional Advisors 272
Risk Environment 273
Technical Matters 277
Summary 281
Chapter 18 Buyouts of the Smallest Companies 283
Advantages 283
Cautions 284
Valuation 285
Viewpoint of the Seller 286
Viewpoint of the Buyer 287
Professional Advisors 288
Risk Environment 288
Technical Matters 289
Summary 291
Chapter 19 Inside Buyouts Compared with Sale to Outsider 293
Relative Negotiating Strength 293
Where’s the Money? 294
Asset or Stock Sale 296
Contingency Payments 298
The Day After 298
Time Uncertain—Getting to the Close 299
Investment Bankers and Intermediaries 299
Common Third-Party Buyers 300
Summary 302
About the Website 305
Index 307
